The Federal Unemployment Tax Act (FUTA) plays a key role in funding state unemployment insurance programs. In 2025, employers in California, Connecticut, New York, and the US Virgin Islands faced the possibility of higher FUTA taxes due to outstanding federal unemployment insurance advances. States had until November 10, 2025, to repay those advances or apply for relief related to the Benefit Cost Rate (BCR) add-on.
Final determinations are now in, and the impact for employers in these states is clearer.
What changed in 2025?
During 2025, both New York and Connecticut fully repaid their outstanding federal advances. As a result, employers in those states avoided any FUTA credit reduction and remain subject to the standard FUTA rate.
California applied for a waiver of the BCR add-on and was approved. Employers in California are therefore subject to a reduced FUTA credit reduction for 2025.
The US Virgin Islands also applied for and received a waiver of the fifth-year BCR add-on, though a higher credit reduction still applies due to the length of its outstanding advance.
Final 2025 FUTA credit reduction rates
For the 2025 tax year, the final FUTA credit reduction rates are as follows:
- California: 1.8% total FUTA rate, resulting in up to $126 per employee per client
- New York: Standard 0.6% FUTA rate, up to $42 per employee per client
- Connecticut: Standard 0.6% FUTA rate, up to $42 per employee per client
- US Virgin Islands: 5.1% total FUTA rate, up to $357 per employee per client
These rates replace the higher preliminary estimates that included the BCR add-on for several states earlier in 2025.
What this means for Cast & Crew clients
Beginning in March 2026, Cast & Crew will issue invoice adjustments to reimburse clients for BCR add-on amounts that were withheld during 2025. Credit invoices will be issued for each impacted project and uploaded to your regular document portal, including Studio+, Egnyte, or the Client Portal.
To arrange for your credit to be issued, please contact the appropriate Accounting Department:
For additional background on FUTA credit reductions, including how they are determined, you can also review guidance published by the US Department of Labor.
